The first step in any negotiation is determining your own “walk away” point. That is why Treasury Secretary Tim Geithner’s claim yesterday that the Obama administration is “absolutely” willing to allow $500 billion in tax hikes and $100 billion in spending cuts begin on January 1st is so instructive.

In an interview on CNBC yesterday, Geithner was asked: “When it comes to raising taxes on the wealthy, those making more than $250,000 — if Republicans do not agree to that, is the administration prepared to go over the fiscal cliff?”

“Oh, absolutely,” Geithner replied. “There’s no prospect in an agreement that doesn’t involve the rates going up on the top 2 percent of the wealthiest.”

Could Republicans confidently make a similar statement? Of course not. And that is why Democrats have all the leverage in the fiscal cliff negotiations.

But now fast forward to late January or early February when Geithner reaches the $16.394 trillion legal limit for issuing new Treasury bonds. Could Geithner confidently say he is “absolutely” willing to stop paying all of the federal government’s bills on time? Of course not. He couldn’t walk away. He would have to negotiate.

And that is exactly why Republicans should not be negotiating major entitlement reform as part of the fiscal cliff deal. They have no real leverage now. Geithner and Obama are perfectly willing to walk away if they don’t get a deal that liberals will love. But if Republicans wait to address entitlement spending till the debt limit negotiations, then Obama and Geithner will not have that luxury. They will have to entertain better conservative reforms.

And Obama knows this. That is why he panicked at a New York Times report that conservatives may give him his tax hike on the wealthy now and wait for a real budget deal till the debt limit talks. “I want to send a very clear message to people here: We are not going to play that game next year,” Obama said in remarks to the Business Roundtable, a trade group.

But notice what neither Obama or the White House have said yet: that they will veto any fiscal cliff deal that does not include a debt limit hike. Until Obama does that, and probably even if he does, Republicans’ best option now is to let Obama have his tax hike now and seek real spending cuts later.

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Lefty PlaybookGlenn Greenwald on Obamacare and the corporatist revolving door.The Washington Post‘s Greg Sargent says Obama will not negotiate on the debt ceiling this time.ThinkProgress reports on the successful leftist attack on Olive Garden after the companies anti-Obamacare comments.